Euphoria is far more dangerous than fear because it's seductive. When your neighbor, your taxi driver, and your social media feed all agree on a single 'guaranteed' winner, you are likely witnessing a peak in FOMO (Fear Of Missing Out). During these times, 'irrational exuberance'—a term coined by Alan Greenspan—takes over.

Our analysis showed that during the 2021 crypto rally and the early 2024 AI surge, sentiment reached 'Euphoria' levels long before the actual price peak. However, the risk-reward ratio had already shifted unfavorably. Euphoria leads to leverage, and leverage leads to cascading liquidations when the music eventually stops.

How do you survive a bubble? You must develop an exit strategy while you are still happy with your gains, not when you are forced to sell by the market. Watch for the 'Confirmation Bias' trap where investors only seek out news that supports their bullish view. The moment dissenting opinions are laughed at or ignored, the danger level is at an all-time high.

Protecting capital is more important than catching every last dollar of a rally. Remember, it is better to leave the party while the lights are still on than to be crushed in the darkness during the rush for the exit.